Class Consciousness

when the New York Times sets out on a multi-week series on "class" in America, it is shocking to see the authors writing so stupidly about the issue...

What Marx argued was that the nature of capitalism was encouraging a flattening of class distinctions, where the vast numbers of the population would increasingly make their income through wage labor, while a very small number would own enough capital to earn most of their income through returns on their wealth...

There are interesting classic issues of class to analyze in the modern economy, say the status of the owners of subcontractors, companies totally dependent on big corporations but officially operating as separate firms. This is a pervasive phenomenon but does not override the increasing domination of the economy by larger and larger companies that straddle the globe, even as more and more workers around the world share a common position as workers for those global corporations.

Given the complexity of society, it's actually an easy intellectual exercise to catalog the differences between people -- the apparent program of the New York Times authors in coming weeks -- but the harder exercise is to understand commonalities that transcend those surface differences. The interests of the elite are in emphasizing those differences to keep workers divided against each other economically and politically.

Since I no longer own my small business, and since I do not control billions in assets, I suppose that I should identify with the oppressed labor class.

UPDATE: On a related note, the Washington Post reports on Pew study of current political coalitions.

Both parties now are coalitions of the wealthy and not-so-wealthy, and of well-educated and less-educated voters.

Economist Arnold Kling, one of the bloggers at EconLog, recently posted a response to Nathan Newman's comments on a new NY Times series on Class in America. In his post he stated: [Tracked on May 16, 2005 7:36 PM]

Marx would not have understood the ability of Productive facilities of High-tech and low Capital. He, like many Economists of Today, could not envision an erosion of the Capital aggregation function. Ownership of the Means of Production meant Wealth; prosperity which Marx wanted Workers to steal from their Owners.

Some, Today, want a substitute Enabler for Labor (Government). What has been the failure of the American Labor Movement? Union Management are College Graduates and Professional Labor Organizers--who have never worked on a Plant floor, or drove a truck. The Corporate Model has co-opted the Union Movement. It would be the same with a larger Welfare state. lgl

class - defined as a combination of income, education, wealth and occupation

Arbitrary and artificial. Plus, the implication that "class" exists on a linear scale with one above and therefore better than the previous ignores the complexity of combining four factors into a single index. Which is more important, income or education? Is a wealthy laborer in a higher class than a bankrupt CEO?

The Times classifies Americans by income, arbitrarily dividing the continuum into quintiles. Why not quartiles? Or deciles? They assign importance to mobility between quintile-defined classes but if the classes were smaller and more numerous (percentiles for example), mobility would be both universal and meaningless. Statistical noise. But perhaps the quintiles are also measuring only noise.

Maybe we should make "health" a class definer. Would you rather be healthy or rich?

The caste system resulted in classes based only on lineage. Similarly the British aristocracy was the highest class entered only by carefully choosing one's parents.

The US has created a classless society but some find in necessary to artificially create classes so they can feel superior or because they want pity.

A 1992 Treasury Department study showed that between 1979 and 1988, 86 percent of those in the bottom income quintile moved to a higher quintile, and 35 percent in the top income quintile moved to a lower quintile.

A 1995 Federal Reserve Bank of Dallas report showed that almost three-fourths of those in the bottom quintile in 1975 were in a higher quintile by 1991, and almost 40 percent in the top quintile moved down to a lower quintile over the same period.

A 2000 Economic Policy Institute study showed that almost 60 percent of Americans in the lowest income quintile in 1969 were in a higher quintile in 1996, and over 61 percent in the highest income quintile had moved down into a lower income quintile during the same period.

If (as you claim) the lowest quintile's average income has not improved, the income of the people who used to populate that quintile has.

Interesting data, Jim, but I don't think it shows much. So some people move out of the bottom quintile into the next one, with an average income of $28,000 a year. They probably also got married and had some kids. I doubt they set aside much of their income.

On the other hand, those who manage to get into the top quintile for a while, with an average income of $150,000/year, probably managed to accumulate a significant net worth...

If you want to look at income mobility in the US I suggest you look at Bhash Mazunder's work at the Federal Reserve Bank of Chicago.

He compared total lifetime income of one generation as compared to the total lifetime income of their fathers -- thus getting around the problems of many studies like the ones cited above that only looked at snapshots of income --
and found that income mobility was much weaker in the US then generally believed and that the big surprise was that it was much lower in the US then in Canada, the UK and much of Europe.

In general he found that over half of an individuals lifetime earnings were a function of the fathers life time income.

In a later study he found that much of the difference in life time earnings could be found by the differences in access to capital.

To answer your question, Marx probably would change his analysis since the liberal income transfers created under FDR saved capitalism from itself and allowed capitalism to thrive rather then destroy itself as Marx projected.

A quote from Spencer; "To answer your question, Marx probably would change his analysis since the liberal income transfers created under FDR saved capitalism from itself and allowed capitalism to thrive rather then destroy itself as Marx projected."

A perfect example of an argument that makes perfect sense from an interest perspective (FDR's programs certainly did and do help some, though at the expense of others), and absolutely none from a fact perspective (the facts of FDR's programs change from generation to generation).

The difficult problem deals with actual lifetime income versus desired lifetime income. Not just desire as in, "I'd like to make more money." but as in "I need to make more money in order to send my kids to college, buy a bigger house and live the lifestyle I think I deserve. And I'm not going to quit trying until I make more than 99% of the people in America." Do we live in a country where you can get whatever you want if you work hard and smart enough or one where "You can't always get what you want, but you get what you need."* "Mom and Dad were comfortable on their income and I can be too."

*Apologies to the Rolling Stones

Mazumder questions the possible effect of motivation as well as lack of capital and inability to borrow against future income. "Families that are unable to access credit may not optimally invest in their children's schooling." Sounds like something a banker would say.

And for the real econ junkies out there, here is where you can find all the publications of the Chicago Fed Letter from 1987 to 2005 on line. I love this web thing.

For me the writers of the articles do not seem to be stupid at all. At least they represent what sociologists think about social class.

Researchers of social structure try to answer the question how society works under the surface. So called neo-marxist sociologists (for example E. O. Wright) tried to apply the Marxist class theory, but the terms of ownership did not describe the social differences well. Since then sociologists use word class in the artificial and arbitrary meaning of some combination of incume, education, race, etc, they did not find better definition. Since then they are not so much interested in questions about relation to capital. So it has nothing to do with the authors of the New York Times article.

Monkeyboy:
The Investment Company Institute and the Securities Industry Association published a study Equity Ownership in America (PDF, 2.4 meg) which shows in some detail the number and demographics of US households that own equities. The study shows that between 1983 and 2002, the number of US households owning equities went from 15.9 million (19.0%) to 52.7 million (49.5%). The 2002 mean value per household, $171,000, median $50,000.

Clearly, ownership of equities is growing in dollars and number of owners. If ownership of equities is a good thing, then we're moving in the right direction.

CLASS STRUGGLE? Despite what you may read in the papers, the American Dream is alive and well.

It carefully counters the recent spate of "Mobility Mania" articles.

Recent "news" reports implying it has become more difficult for young Americans to live better than their parents fail to identify any genuine problem. And they suffer from one added handicap: They are demonstrably untrue.

Does it really matter if someone moves from the lowest quintile, with an average income of $11,000/year, up to the next one at about $28,000 a year average, over their lifetime?

The Republicans have spent the last 4+ year making life easier for the rich and harder for the poor. Of course they will deploy their lockstep shills to counter the effects of their policies in the minds of their poor supporters.

One odd thing about income data, in the last economic boom, the lowest and highest quintiles saw gains of 13% while the 60% in the middle saw gains of about 2%...those gains are gone now, but still...

Re; "The Republicans have spent the last 4+ year making life easier for the rich and harder for the poor."

What do the rich have to do with the poor?

The flaw in your strategy is that it depends on the concern of the better off for the well being of the less well off. But your tactics (theft, guilt trips, insults, etc.) virtually ensure that the better off will feel resentment, not concern.

The NYTimes article that referred to my 1987 Presidential address to the American Economic Association badly misstated what I said. I did not claim that children’s income was not much related to the income of their parents. In fact I assumed for the sake of discussion that about 40% of the parents’ income advantage was passed on to children. Note that grandchildren would then only have about 16% of the advantages of their grandparents. It is true that some recent work claims the fraction passed on might be as high as 50% rather than 40%, but that is controversial, as Dean Lillard of Cornell and others have argued. I also stand by my claim that there is no credible evidence that the degree of intergenerational mobility has fallen during the past few decades.

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